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Thames water hit with unprecedented fines for water pollution offences

A ‘perfect storm’ of aggravating factors has produced the highest penalty ever imposed for offences of this nature. The worry for companies operating in this highly regulated sector is that this level of fine may become the ‘new normal’.

As set out in the Environment Agency’s press release from 22 March this year Thames Water was ordered to pay an unprecedented £20,361,140.06 in fines and costs for a series of pollution incidents on the River Thames. The incidents were described as being caused by negligence and to have led to the death of wildlife and distress to the public.

The unprecedentedly high total penalty stems in part from the fact that this is not simply one case but six cases heard and sentenced together with fines imposed as follows;

■ Little Marlow: £8,000,000

■ Aylesbury: £9,000,000

■ Henley: £1,000,000

■ Littlemore: £800,000

■ Didcot: £800,000

■ Arborfield: £150,000

Costs orders totalling £611,140.06 were also imposed.

Even so this level of fine sets a new bar for the extent to which the Courts are prepared to impose extremely heavy financial penalties within the existing sentencing framework focussing on the sentencing aims of both punishment and deterrence.

Reviewing the summary details made available for each of the offences, all of them would most likely have been classed by the sentencing Court as being Category 1 harm offences and as noted above were found to have been committed as a result of negligence. However given the circumstances it can be envisaged that culpability would have been assessed as being towards the high end of the negligent category bordering on the higher category of recklessness.

On that basis considering the guideline penalties set out in the Sentencing Council’s Environmental Definitive Guideline the starting bracket for a large organization would be around £425,000 with a range up to £1,500,000 per offence. However given that Thames Water is a very large organization, with a turnover in excess of £2 billion, 40 times the entry level for the large organization bracket, potential fines fall well outside the parameters specified in the Guideline.

On that basis the highest of the six fines above, £9 million, is around 20 times the suggested nominal starting point discussed above. This multiplier given an indication of how serious the Courts considered these offences to be.

Also of note is Thames Water’s record of previous convictions. In particular that they had already been fined £1 million and £380,000 respectively in 2016 for similar problems dating back to 2013 at two of their other sewage treatment works in earlier cases brought by the Environment Agency. It also appears that Thames Water were found not to have been open and frank with the EA, that would have been taken into account as a significant aggravating feature. In addition it appears they may have been aware internally of the issues that led to the offences but did not act to remedy them. It may also be that the perceived lack of co-operation into the EA investigation could have reduced the credit which would have resulted from what we assume were guilty pleas in these matters.

Even taking into account all the above factors, this case does appear to indicate a significant ramping up in the level of penalties that the Courts are prepared to impose. The only potential point of comfort is the comment cited from His Honour Judge Sheridan that this was ‘a record breaking fine for record breaking offending’ meaning that the very high level of penalty results from the exceptional level of seriousness of the offences.

The fact that there were multiple breaches following from a previously poor compliance record would inevitably have left the court with little choice but to act in order to punish and deter. These offences could be described in summary as involving;

■ A series of incidents with an actual and devastating environmental impact

■ Apparently aggravated by senior management complicity

■ Likely to have invoked the principle that putting profit before environmental protection will not be tolerated

It is also of note that the likely impact on share prices and the knock on effects on institutional investors has the capacity to change the perceived risk profile for water utility companies at precisely the time when the market is being opened up to greater competition.

Our view is that once a precedent is set for fines at this level to be imposed other subsequent decisions are bound to take account of this decision, this is likely in turn to lead to a general increase in penalties across the board.

Fuller details of the case are in the EA’s detailed press release which can be found here

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